Shire helps keep FTSE 100 afloat on bid speculation

Tue Jun 17, 2014 4:06am EDT

* FTSE 100 up 0.1 pct

* Shire adds most points on bid speculation

* Whitbread rallies after strong update

* UK inflation data eyed at 0830 GMT

By Francesco Canepa

LONDON, June 17 (Reuters) - Britain's main equity index steadied on Tuesday, helped by bid speculation around drugmaker Shire and a strong trading update from Premier Inn-owner Whitbread.

Shares in Shire rose 3.1 percent to add the most points to the FTSE 100 after sources told Reuters the healthcare group has hired investment bank Citi as an adviser, expecting to receive takeover approaches.

"We've been buyers of Shire recently and on the back of this we'd look to add to positions," said Manoj Ladwa, the head of trading at TJM Partners.

Healthcare companies have seen a wave of merger and acquisition speculation in the past two months. Shire has been tipped as a possible target partly because of its tax base in Ireland, where effective corporate tax rates are among the lowest in the world. The stock has risen nearly 30 percent since mid-April.

"You've got at least a third of the value of any bid priced in, but I think you've still got a fair amount of upside potential even if you buy at this sort of level," TJM's Ladwa said.

He said the stock, now trading around 36 pounds ($60.45), could hit 50 pounds if a bid materialises.

Shire's stock added 2.6 points to the FTSE, which was up 7.93 points, or 0.1 percent, at 6,762.57 points at 0747 GMT.

Also helping prop up the index was Whitbread, Britain's biggest hotel and coffee shop operator, which reported a robust start to the year, driven by particularly strong growth at its Premier Inn hotels business.

The FTSE had fallen in three of the previous four sessions, pressured by geopolitical concerns ranging from violence in Iraq to tensions between Russia and Ukraine.

Thirty-minutes charts on the index's June futures, up 0.1 percent at 6,762.5 points, showed upside potential was limited. Short-term momentum, as gauged by the index's moving averages, was positive, but the future contract was capped by resistance less than 1 percent above current levels.

"The upward potential should be limited by the resistance threshold at 6,810, corresponding to the 50 percent Fibonacci retracement level of the previous down move," said Nicolas Suiffet, an analyst at Trading Central in Paris.

British inflation data for May, due at 0830 GMT, will be scrutinised after the governor of the Bank of England, Mark Carney, last week raised the prospect of a rate increase sooner than the market had expected.

One of the Bank of England's most dovish policymakers, David Miles, has said that he expects to vote for a hike in interest rates by May 2015, the Times of London reported on Tuesday.

($1 = 0.5956 British Pounds) (Reporting By Francesco Canepa; Editing by Larry King)